The Shanghai Composite Index
SHCOMP, +0.54%
closed up 3.2% — recording its first back-to-back session increases this year, with gains picking up in the afternoon. Worries about slowing China growth, mixed policy signals from authorities, and a drop in global oil prices contributed to the country’s largest stock index falling last Friday into a bear market, defined as a drop of 20% or more from a recent high.

“At least a stable China [market] is giving the rest of the region permission to have a little bit of a bounce,” he said.

This past weekend, Chinese authorities talked up the underlying health of the Chinese economy, likely calming some fears among investors and encouraging them to return to markets, said Angus Nicholson, a market analyst at brokerage IG.

“Chinese markets have already suffered such a dramatic correction this year that I think some of these official assurances have helped bring a few buyers back to the table,” he said.

The release of the 2015 growth figures also turned investor attention to this year’s outlook, renewing enthusiasm about Beijing’s pledge to cut overcapacity in the coal and steel industries and reduce inventories in the housing sector. The result: These sectors were the best performers on Tuesday. Large state-owned enterprises also rose sharply on hopes of more mergers and acquisitions aimed at making them more efficient.

In addition, Chinese President Xi Jinping departed Tuesday for the Middle East, with stops planned in Saudi Arabia, Egypt and Iran.

That boosted hopes among investors that China will hold more political and economic influence in that region. China is planning a “One Belt, One Road” strategy, in which it plans to lay networks of infrastructure to better connect its economy with the rest of Asia, Africa, the Middle East and Europe.

“Companies suffering from overcapacity domestically may benefit from the ‘One Belt, One Road’ initiative,” said Zhou Xu, an analyst at Nanjing Securities.

Stocks such as China Railway Group Ltd. and Power Construction Corp. of China Ltd. jumped by the 10% daily limit that the government allows.

In addition, investors expect the Chinese central bank to cut the reserve requirements for banks, given that volatility in the currency market has largely eased off, added Zhou, “Further lowering the reserve ratio is necessary and will boost liquidity for the mid-to-longer term.”

The Australian dollar
AUDUSD, -0.1742%
recovered losses to trade up 0.8% at $0.6920.

The Hong Kong dollar fell to a fresh four-year low of HK$7.8090 to one U.S. dollar. The local dollar has weakened for the fourth session in a row, amid worries that the city’s economy could weaken as China’s does. But it also recovered Tuesday, last trading at HK$7.8065 to one U.S. dollar, up 0.1% from the previous day’s close.

Brent
UK:LCOH6
, the global oil benchmark, was last up 2.45% at $29.26 a barrel. It fell to a fresh 12-year low of $27.70 overnight, as investors absorbed the news that sanctions were lifted against Iran, which can again trade oil on international markets.

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